Employees bring a business to life. That’s why business owners should bring life insurance to employees.
Employee benefit trends and surveys show that employers looking to attract and retain skilled employees should offer life and disability insurance as part of their benefits packages. Life and disability are affordable, easy to administer and provide a financial safety net that employees have come to expect.
Here’s some advice for business owners looking to include life and disability to enhance their benefits packages.
The Need for a Life Insurance Benefit
Fifty-five percent of private-sector employees took advantage of employer-sponsored life insurance last year, the U.S. Bureau of Labor Statistics reported. It remains a popular benefit, especially in a tight labor market.
“It can be tough to get new employees these days, so you don’t want your benefits package to be lacking,’’ says Kevin Mackay, a senior benefits consultant for Alpha/OneDigital Health and Benefits, a national company specializing in employee benefits and human resources services.
Mackay has worked with employers who were glad to have life insurance policies in place when an employee death occurred — and others who regretted they didn’t. One client had a disability policy in place for his workforce, but no life insurance. When an employee died, and there was no death benefit from a life insurance policy to help defray costs for the surviving family, the business owner paid out of his own pocket to help the family. After that, he invested in a group life insurance policy for his employees, Mackay says.
Group Life Insurance Explained
“Life insurance makes sense for any size group,’’ says Jeanne Fuelling, director of Specialty Products for Medical Mutual. “Really, it’s a critical component of any benefits package, especially for employees with families.”
Life insurance is among the many products offered by MedMutual Life, which is part of Medical Mutual, the oldest health insurer based in Ohio. Typically, employers pay for a basic term life plan that, in the event of an employee’s death, pays a designated beneficiary a set amount of money — two to three times an employee’s salary, for example. The insurance coverage ends when the employee leaves the company.
These employer-paid plans are free to employees and have little or no underwriting involved. Beyond these basic group policies, employees usually have the option to add insurance coverage and dependents to the plan, at the employee’s expense.
Disability Helps When Accidents Happen
Employment disrupted by an illness or accident not related to work — everything from cancer to broken limbs — happens more often than you think. One in four 20-year-olds will experience a disability for 90 days or more before they turn 67, according to the Social Security Administration. To cover these situations, many employers also make short- or long-term disability coverage available, often as an option paid by employees. Disability plans can offer a financial lifeline, ranging from 50 percent to 67 percent of an employee’s salary.
“Disability coverage gives employees some level of reassurance if a serious illness or accident happens,’’ says Jim McGonagle, vice president of Specialty Products for Medical Mutual. “They’ll have peace of mind knowing that a stream of income will continue.”
Employees buying life and disability insurance through an employer will generally pay much less than they would shopping on their own thanks to group rates and simplified underwriting.
The Cost and Convenience
Buying life insurance and disability products is not as expensive as employers think. “Generally, the cost of employer-paid life insurance is less than 3 percent of the overall cost of medical coverage,’’ McGonagle says.
Putting together a census of eligible employees, signing them up and monitoring the plan are done with the assistance of brokers or benefits consultants like Mackay. They work with the company and the carrier in handling claims.
“There’s not a ton of work needed by employers, but it’s part of doing business,’’ Mackay says. “For employees, it’s certainly easier than managing individual plans.’’
Employers looking for good insurance plans should find a reputable broker or employee benefits consultant to handle the search. Employers should consider having their health, life and disability insurance with the same carrier, which can be beneficial for billing, administration and pricing. With offices throughout Ohio, Medical Mutual can offer employers service and convenience not possible with national carriers.
“We are local, which a lot of employers appreciate,” McGonagle says. “We’ve been able to personally help out beneficiaries in their times of need.”
Also pay attention to features that add value to a plan. For example, MedMutual Life coverage options include will preparation, identity theft services and grief counseling.
“Businesses can support retention and recruitment by offering comprehensive benefits packages that include coverages as life and disability insurance,” says McGonagle.